Bid to make financial terms and conditions clearer

Image source, Getty Images

  • Author, Kevin Peachey
  • Role, Personal finance correspondent, 91热爆 News

Financial firms will need to ensure terms and conditions are easy to understand and products provide fair value for customers, under new plans.

Businesses must already treat customers fairly, but the UK's financial regulator is looking to bolster the rules with a new Consumer Duty.

The Financial Conduct Authority (FCA) wants the heightened rules in place by July next year.

They are intended to protect consumers and make it clear how to complain.

The FCA said that many financial firms had operated with a focus on helping customers during the pandemic.

But it said that some products and services appeared to be designed, whether intentionally or not, without considering customer outcomes.

The new duty "modernised" current rules, and particularly expanded the requirement for products to offer fair value.

Sheldon Mills, executive director of consumers and competition at the FCA, told the 91热爆 this meant terms and conditions - as well as prices - would become clearer, it would be absolutely clear how customers could complain, additional charges would be clear and fair, and it would be easy to switch to another provider.

This should prevent issues such as the loyalty penalty, when longstanding insurance and utility customers, who might not find it easy to switch, found themselves paying considerably more than newer customers for the same service.

"We want firms to be putting themselves in the shoes of consumers and asking 'Would I be happy to be treated in the way I treat my customers?'," Mr Mills says.

Direct compensation?

The duty would apply to a wide range of financial sectors, including banking, credit, mortgages, investments, pensions, insurance and payment services.

Pippa Tasker, a financial services partner with law firm CMS, said: "For many firms, it will require a significant shift in culture and behaviour, necessitating a review of all policies and procedures."

The FCA has yet to decide on whether it would recommend that consumers get a direct right to bringing claims against financial firms, rather than going through the Financial Ombudsman Service.

"While the FCA remains interested in views on extending the existing right of individuals to bring a claim against a financial services firm, it is, rightly, focusing on tools that seek to prevent harm in the first place," said Jenny Stainsby, of law firm Herbert Smith Freehills.